Gasoline Prices Provide Fuel For Gasbags

May 02, 1996|By Stephen Chapman.

All of a sudden, every politician in Washington is running on a platform of lower gasoline prices. Democrats have behaved in a cynical, opportunistic way on this issue for years, and Republicans have decided it's a shame to let them have all the fun. So now the tawdry spectacle stretches all the way across the political spectrum.

When gas prices jumped in recent days, Senate Majority Leader Bob Dole immediately called for repeal of the 4.3-cent-per-gallon gas-tax increase passed at President Clinton's request in 1993. Clinton responded by releasing 12 million barrels of crude oil from the Strategic Petroleum Reserve and promising to investigate the conduct of the major oil companies.

The Republicans may gain a brief tactical advantage from proposing intervention to ease the pain of motorists, but they are bound to harm their broader cause in the long run. Their tax-cutting approach suffers from three major defects. First, it is hypocritical: They want to scrap Bill Clinton's gas tax increase, but they ignore those approved by Ronald Reagan and George Bush, which amounted to 10 cents per gallon. Second, it is pitifully inadequate: It tries to salve a 14-cent-per-gallon price increase over the past two months with a measly 4.3-cent-per-gallon tax cut, leaving consumers worse off than they were before.

Most important, it concedes the essential point to opponents of the free market by agreeing that the federal government should take action in response to every upward blip at the pump. If Democrats are shrewd, they will vote to repeal the tax and then ask Republicans, "If the federal government is willing to settle for less, why shouldn't the oil companies do the same?" That will make a good argument for price controls or a windfall-profits tax, and Dole and Co. will be in a poor position to resist.

The Democrats, for their part, have been perfectly shameless in depicting a minor price increase as a national catastrophe. The worst offender was Massachusetts Rep. Edward Markey, who in a speech from the House floor bitterly denounced the "naked greed of the oil companies" and lamented the tragedy that "consumers are in need." Oil companies, he declared, "are tipping consumers upside down and shaking money out of their pockets."

Listening to Markey, Clinton and other Democratic foes of Big Oil, you would never know that consumers have been cruising on Easy Street for a long time. Except for a small spike after Iraq invaded Kuwait in 1990, crude oil and gasoline prices have been declining for a decade and a half. Last year, they were at their lowest level ever recorded, after adjustment for inflation--less than half what they were in 1981. If oil companies are so adept at cooking up conspiracies to rob consumers, why did they wait so long to put this one into operation?

The recent price increase was hardly calamitous--amounting to about $77 a year for the average driver if the price increase sticks, which it probably won't, and if the average driver continues to drive as much as before, which is also unlikely. Nor was there anything mysterious about the change. It was the result of mundane fluctuations in supply and demand, something Clinton and Markey never complained about when they worked to the advantage of consumers. Democrats think perpetually falling gasoline prices are just part of the natural order.

Clinton did more than complain about the modest gain for oil producers--he acted to take it away by dumping some of the federal government's stocks of petroleum in an effort to force prices downward. This was a gross abuse of a resource that was meant to be used only in cases of national emergency, such as a war or a sudden interruption of supplies on the order of the 1973 and 1979 oil crises.

Nothing comparable has happened this time. Supplies are abundant and if the market were allowed to function, they would become more plentiful in response to the price increase. Higher prices stimulate oil companies to produce more gasoline and induce drivers to use less, a process that can be expected in due course to lower prices. By unleashing Energy Department stores, the president will discourage producers from pumping more oil and spare drivers in gas-guzzling vehicles the unspeakable hardship of driving less or even--perish the thought--using public transportation.

In the years when the federal government used its powers to control gasoline prices, they soared. Since it stepped back and let the free market work, they have reached historic lows. Politicians and the public might remember that as they succumb to the temptation to think the government can and should determine the right price of fuel.